SINGAPORE (BLOOMBERG) - Noble Group Chairman Richard Elman stepped up his defense of the Singapore-listed commodity trader that he founded by boosting his stake after the stock sank to the lowest since 2008, the company's credit rating was cut to junk and analysts scaled back price targets.
Elman bought 10 million shares on Friday (Jan 8) for S$3.19 million, raising his holding to 22.13 per cent, according to a statement to the Singapore exchange on Monday (Jan 11). After news of the purchase, made at an average price of 31.85 Singapore cents, the stock fell as much as 8.8 per cent to 31 cents amid a region-wide drop in raw-material shares.
Noble, which lost about two-thirds of its market value last year amid attacks on its accounts, has extended losses in 2016 after Standard & Poor's joined Moody's Investors Service in cutting its rating below investment grade. Over the past year, the Hong Kong-based company has sought to reassure investors by paring debt, selling assets and boosting transparency, with Elman pledging to shareholders last June to "right the damage." That defense has been undermined as China's slowdown hurts commodity demand and prices, prompting investors to shun raw-material companies.
"Richard Elman is trying to say that he thinks this current bout of selloff we're seeing is overdone," Angus Nicholson, an analyst at IG Markets in Melbourne, said by e-mail. "Unfortunately, his actions are unlikely to really alter investor perceptions on the company. China demand fears are dominating trade in commodities-related companies," said Mr Nicholson, citing losses also seen Monday in Rio Tinto Group and BHP Billiton Ltd.
Noble shares traded 5.9 per cent lower at 32 Singapore cents at 11:17 am local time, taking their decline so far this year to 20 per cent. BHP, the largest mining company, fell on Monday to the lowest since 2005, while Rio lost 4.8 per cent. A media representative for Noble declined to make an immediate comment on Mr Elman's purchase.
Mr Elman, a former scrap-yard worker who dropped out of school at 15, built Noble into Asia's largest commodity trading company by revenue. He worked at another trader, Phibro, before setting up his own firm with US$100,000 in savings in Hong Kong. He remains Noble's biggest owner, ahead of China's sovereign wealth fund, according to data tracked by Bloomberg.
Noble Group has made efforts to buoy its creditworthiness as its shares slumped. It agreed in December to sell the remaining 49 per cent of its agricultural unit to Cofco Corp, China's top food company, for at least US$750 million to reduce debt. Cofco already owned the other 51 per cent of Noble Agri, bought for US$1.5 billion in 2014.
Even after the deal, S&P said that liquidity, or short-term financing, was no longer strong enough to sustain Noble Group's investment-grade rating. The outlook for the commodity trader's "capital raising could be complicated by depressed" raw- materials markets, it said.
Noble said last week that an increase in calls for collateral, or demands it set aside more cash to guarantee trades, after the downgrades was still below the US$100 million to US$200 million range that chief executive Yusuf Alireza had estimated in comments to analysts last year. The company will receive about $200 million after selling receivables to shore up its balance sheet, according to people with knowledge of the matter.
Analysts have been cutting price targets as the stock retreated. Last week, Credit Suisse reduced its outlook to 40 Singapore cents from 50 cents, citing concerns about the company's liquidity. Oversea-Chinese Banking Corp pared its target to Singapore 44 cents from 54 cents.